Govt Considers Increasing Levy on Petrol to Meet Revenue Shortfall

Prime Minister Shehbaz Sharif’s administration continues to wrestle with two major policy decisions, postponing rulings on both the appointment of dual nationals to key State Bank of Pakistan (SBP) positions and the implementation of a carbon levy aimed at reducing emissions. In separate meetings Tuesday, the government deferred action on both matters. Prime Minister Shehbaz Sharif, for the third time in a row, delayed deciding whether dual nationals should be permitted to serve as governor, deputy governors, or directors at the central bank. Earlier that day, Deputy Prime Minister Ishaq Dar chaired another inconclusive session focused on the proposed carbon levy. According to the report by Express Tribune, significant pressure exists to raise the current petroleum levy from Rs. 60 per liter toward the legal maximum of Rs. 70 per liter. This increase would partially offset upcoming reductions in fuel prices while generating approximately Rs. 15 billion in additional monthly revenue for a government facing substantial revenue shortfalls. The International Monetary Fund has recommended introducing a separate carbon levy, starting at Rs. 3 per liter and gradually increasing to Rs. 10 over three years. This measure forms part of the conditions attached to the new $1 billion Climate Resilience Facility currently under negotiation. According to the report, the government is considering implementing both levies simultaneously. The prime minister’s Monday meeting on these matters ended without resolution, prompting him to refer the issue to Dar, whose Tuesday session also failed to reach consensus. The main disagreement centers on how to utilize proceeds from the proposed levies. The climate change ministry advocates directing funds toward climate mitigation efforts, while an alternative proposal suggests using the revenue to reduce electricity bill sales tax from 18% to 10%. Additional concerns have emerged regarding the European Union’s Carbon Border Adjustment Mechanism, which could impact Pakistani exports by imposing pricing measures on carbon-intensive goods.